The bag man and the money mole

We’ve been looking at some of the more colorful Brazilian stooges whose careers have gone belly-up as a result of the massive corruption scandal surrounding Petrobras, the state-run oil giant. Here are three more.

Brasil, Brasília, DF. 18/10/2005. O doleiro Alberto Youssef, operador do mercado financeiro que teria ligações com a corretora Bonus-Banval, depõe na sub-relatoria de Movimentação Financeira da Comissão Parlamentar Mista de Inquérito (CPMI) dos Correios, no Congresso Nacional, em Brasília (DF). - Crédito:JOEDSON ALVES/ESTADÃO CONTEÚDO/AE/Código imagem:161138 — Alberto Youssef

Let’s start with Alberto “Beto” Youssef. A Bloomberg profile last year described him as “Brazil’s black-market central banker” – meaning that over the years he’s “smuggled cash for the rich and powerful” as part of a plethora of sleazy schemes. As a result of all this sordid activity, he’s been arrested nine times on a wide range of charges.

But his most recent role is definitely the role of a lifetime. Youssef was none other than the bagman in the Petrobras affair. Which means that when a blizzard of construction firms “bribed politicians and executives to look the other way as they inflated contracts” with Petrobras and other government-owned firms, Youssef played banker. He’s fessed up about all this to prosecutors – and, in the process, has also fingered other participants in the scheme, all the way up to President Dilma Rousseff herself, who ran the oil firm from 2003 to 2010. In return for his cooperation, his prison sentence of nine years and two months for money-laundering was reduced to three years.

Working as Youssef’s “money mule” in the Petrobras affair was a guy named Rafael Angulo Lopez, who “flew around the world with shrink-wrapped bricks of cash strapped underneath his clothing.” Last August, the New York Times quoted his lawyer as saying that Lopez “took hundreds of trips…with portable fortunes cinched under his clothing.” On one occasion, he traveled with five hundred thousand euros in cash on his person. “He wore the sort of socks favored by soccer players,” reported the Times, “and, when the haul was especially large, an orthopedic undershirt.”

The Independent provided even more details: Lopez would wrap “piles of bills in plastic wrap, pricking the packages and then squeezing them to get all the air out.” He then “stuck the packages to his legs, torso and arms and concealed them with elasticated clothing like Spanx and compression socks, underneath a baggy suit.” In this way, he managed to transport “up to $1.4 million to Europe on his body on commercial flights.” Quartz suggested that the story be turned into “a Brazilian version of Wolf of Wall Street, with middle-aged couriers in baggy suits and compression vests in place of Swiss misses in stilettos and bikinis.”

Paulo_Roberto_Costa-2015_05_05_1 — Paulo Roberto Costa

Then there’s Paulo Roberto Costa, Petrobras’s former director of refining and supply, whose acceptance of a $78,000 Land Rover from Youssef marked the genesis of Operation Car Wash and whose confirmation of Youssef’s testimony – and implication of several dozen politicians in the scheme – helped widen the probe dramatically.

It also brought his sentence down to time served – a year in the can – plus another year’s house arrest. “Without my tip-off, the probe would not have existed,” he bragged in November. He’s now writing a book about his experiences. Presumably he’ll make a nice little sum off of that.

Posted on April 15, 2016April 7, 2016 by usefulstooges 2

The tarnishing of Brazil’s “golden boy”

andre-esteves-arrest-btg-pactual-ptrobras — André Esteves

To an extraordinary extent, the Brazilian investment bank BTG Pactual – described by Dan Horchjan of the New York Times as one of the rare Latin American firms of its kind that rival the top Wall Street and European banks – owes its existence, and its years of spectacular success, to a single individual: its self-made founder and CEO, André Esteves. As people in his line of work go, he’s been an unusually prominent figure in Brazil. “More than any other financier,” Horchjan wrote recently, Esteves “was the face of Brazil’s global ambitions during the country’s recent, short-lived boom – in a hurry to grow and unafraid to compete against anyone, anywhere.” Esteves, whom Bloomberg has called the “golden boy” of Brazilian banking, used to say that the letters BTG in the name of his firm stood for “better than Goldman.”

To be sure, the company has had its share of controversies. In 2007, Esteves was convicted of insider trading. In 2013, BTG Pactual partner Charles Rosier was found guilty in the largest insider-trading case in French history. Other accusations of questionable conduct have been made by high-profile observers but not acted upon. In 2006, for example, Esteves sold BTG Pactual’s predecessor, named simply Pactual, to UBS, the Swiss financial-services company, for $2.6 billion (becoming Brazil’s youngest self-made billionaire), only to buy it back three years later for a smaller sum and combining it with his new firm, BTG, to create BTG Pactual. More recently, Esteves and a BTG Pactual director, Huw Jenkins, were sued in a Hong Kong court for $20 million for making “fraudulent misrepresentations” to secure a deal. Three times since 1999, BTG Pactual has been taken to court by Brazilian authorities for shifting money around to mask profits and thus shirk taxes.

Brasília - Senador Delcídio do Amaral coordena o 1º Fórum Nacional de Infraestrutura. Em debate, transporte, energia elétrica, combustíveis, mineração, telecomunicações, saneamento, entre outros(José Cruz/Agência Brasil) — Delcídio do Amaral

But all of this is now mere background – perhaps even just a series of footnotes. We talked yesterday about the arrest and conviction of Latin America’s #1 construction contractor, Marcelo Odebrecht, as part of Operation Car Wash, the massive probe into corruption surrounding Brazil’s state-owned oil firm, Petrobras. After his arrest last June, Odebracht tried to slip a note to his lawyers asking them to destroy e-mails that implicated Esteves. The note found its way into the wrong hands, so that Odebrecht inadvertently ended up fingering Esteves. Esteves’s name was also mentioned in a recorded conversation in which suspects in Operation Car Wash – notably Delcidio do Amaral, the top-ranking Senator in the Workers’ Party – discussed plans to pay a potentially unfriendly witness, Nestor Cervero, the former head of Petrobras’s international division, to leave the country. And police found a note suggesting that BTG Pactual had bribed a congressmen to the tune of millions of dollars. On November 25, Esteves was arrested – and so was Amaral, who became the first sitting legislator to be swept up as a result of the Petrobras probe.

In a January report on his downfall, the Times‘s Horchjan highlighted “its apparent senselessness.” He quoted analyst Luis Miguel Santacreu as saying that BTG Pactual’s deals with Petrobras and the Brazilian government “were relatively small and had nothing to do with the bank’s core business, which was very profitable….They didn’t need any of these deals to keep on growing.” Felipe Monteiro, a French professor of strategy, made the same point in a comment to Bloomberg: “He epitomizes the idea of a private, successful, entrepreneurial generation of Brazilian bankers,” and so his involvement in “the most classic type of old politics is somehow strange.” It’s especially strange given that BTG Pactual actually lost money on its government deals even as it was turning tidy profits on its core, non-state-related business.

As Marcelo Odebrecht’s ruin sent the Brazilian construction sector tumbling, so the destruction of Esteves’s career shook the country’s financial sector to its roots. Now BTG Pactual’s shares are worth half of what they were. Its bonds are considered junk.

Posted on April 14, 2016April 7, 2016 by usefulstooges 1

Marcelo’s way

The Odebrecht Group is one of those conglomerates whose international reach and level of diversification make one’s head spin. It’s the largest construction outfit in Latin America; Braskem, one of its innumerable subsidiaries, is Latin America’s biggest petrochemical producer.

“They are more than a company,” a Brasilia-based consultant, Thiago de Aragão, told the Wall Street Journal recently; “they are a symbol of modern Brazil.”

Indeed. It’s Odebrecht that is responsible for Miami’s $213-million American Airlines Arena, where the Miami Heat play. It’s Odebrecht that is Angola’s top private employer, with over 24,000 employees in that country alone. At this moment, among many other projects, Odebrecht is building a highway in Ghana that will connect the capital, Accra, to remote eastern regions of the country; it’s expanding and adding bridges to a highway that links Guatemala’s main ports with the Mexican border; it’s upgrading a major airport in Mozambique; it’s constructing an elaborate hydroelectric facility in Portugal; it’s installing “the world’s deepest and most complex sewage pump station” in Abu Dhabi. In 2014 the group celebrated its seventh decade in business.

On March 8, the firm marked another milestone. That was the day on which its CEO, Marcelo Odebrecht, the grandson of the company’s founder, was sentenced to 19 years in prison after being convicted of paying $30 million in exchange for contracts and influence at Petrobras, the state-owned Brazilian oil firm that is at the center of the massive corruption probe known as Operation Car Wash. According to prosecutors, Marcelo’s firms “used Swiss bank accounts to launder nearly $270 million in bribes” between 2006 and 2014.

The presiding judge, Sergio Moro, said Marcelo Odebrecht was “directly involved” with this systematic bribery and money-laundering and “guided the work of others.” This intimate involvement was demonstrated by (among other things) incriminating messages stored on eight cellphones found at Marcelo’s home. While other construction executives nabbed in the probe have bought themselves shorter sentences by turning state’s evidence, Odebrecht refused to spill the beans, saying that he would punish his own kids more harshly for tattling than for cheating.

Marcelo Odebrecht in happier times, with Dilma Rousseff and Raúl Castro

Given the conglomerate’s dimensions and its importance to the Brazilian economy, the arrest and conviction of Marcelo – who took over the reins of the family firm in 2008, at age 40, and whose nickname is “Prince of the Contractors” – is of obvious significance. According to the Journal, Marcelo’s arrest in June of last year caused an economic earthquake, contributing to the onset of Brazil’s current recession. But what makes these developments even more momentousness is Marcelo’s intimate relationship with the Rousseff administration. When the president met with business leaders, Marcelo was invariably present. “Some of the other executives,” one São Paulo businessmen told the Journal, “were jealous that he always got invited and they had to fight for a seat at the table.”

Marcelo is close not only to Dilma Rousseff but to her predecessor and mentor, former President Luiz Inacio Lula da Silva, who is himself being investigated for allegedly accepting illegal funds from Odebrecht.

One thing about having global reach is that when you get in trouble, the investigations, too, will have a global reach. Swiss and Portuguese authorities are now looking into charges of wrongdoing by Marcelo, and several other countries are considering similar probes.

Posted on April 6, 2016April 7, 2016 by usefulstooges 2

The Petrobras probe

As we’ve seen, Brazil’s current president, Dilma Rousseff, was chief of staff in the administration of her immediate predecessor, the beloved Lula. But at the same time she was also head of the state-owned energy company, Petrobras. Operation Car Wash, a probe into Petrobras’s finances, begun in 2014, has investigated several major firms and dozens of politicians – including Rousseff – and has so far uncovered four separate criminal rings. During Rousseff’s second term, which started in January 2015, Petrobras quickly began shaping up into her Watergate.

Brasil, Rio de Janeiro, RJ. 20/12/2011. Paulo Roberto da Costa, diretor de Abastecimento da Petrobras, durante entrevista coletiva na sede da empresa, no centro do Rio de Janeiro. - Crédito:TASSO MARCELO/ESTADÃO CONTEÚDO/AE/Código imagem:160701 — Paulo Roberto Costa

Even before Rousseff’s re-election, several leading figures had been implicated in Petrobras-related corruption. Already in March 2014, for instance, Paulo Roberto Costa, who’d served as Petrobras’s supplies director from 2004 to 2012, was arrested for his role in the bribery and money-laundering scheme. In September 2014, Costa provided authorities with a list of politicians who’d received bribes. He was later sentenced to 12 years in prison (though he’s since been granted house arrest beginning in October 2016). An August 2015 article reported that a couple of politicians had met with Costa in 2009 in a luxury hotel room in Ipanema, Rio de Janeiro, and handed him a liquor bottle containing $200,000 in cash.

Ricardo Pessoa, owner of UTC, a major construction company, was arrested in November 2014 on charges of bribery and money-laundering, also as part of the Petrobras scandal. In a May 2015 plea-bargain deal, Pessoa acknowledged that he’d handed over large sums to several political campaign, including Lula’s presidential bid in 2006 and Rousseff’s in 2014.

In March 2015, the Supreme Court gave the go-ahead for Petrobras-related probes into dozens of members of Congress; in April evidence was uncovered of “similar scams at Brazil’s health ministry and at state-owned bank Caixa Econômica Federal.” In that same month, a poll found that 63% of Brazilians wanted to see Rousseff impeached.

Also in April, party treasurer João Vaccari Neto was arrested and charged with accepting “irregular donations” to the Workers’ Party from Petrobras suppliers, who were alleged to have inflated contracts with the oil company and funneled excess proceeds to party members and political campaigns.

A former Petrobras manager, Pedro Barusco, who cooperated with prosecutors, testified that he’d personally received almost $100 million in bribes, that he’d met Vaccari at fancy hotels or restaurants to discuss the sharing of bribes, and that some of the ill-gotten cash had been passed on to Rousseff’s 2010 election campaign. Julio Camargo, one of the businessmen charged with bribing Petrobras officials, also provided authorities with details of what he called the “institutionalized reality” of bribery at Petrobras, stating that he himself had paid the firm $4.5 million in bribes.

Vaccari denied everything, as did Rousseff.

Then there’s José Dirceu, a former militant student Communist who’d preceded Rousseff as Lula’s chief of staff, a job from which he resigned after being charged in the 2005 Mensalão scandal (which we’ll get around to later this month). Found guilty in 2012 of corruption, embezzlement, racketeering, and money- laundering, Dirceu was sentenced to seven years in prison, but was apparently released at some point prior to August 2015, when he was arrested on charges of corruption and money-laundering in connection with the Petrobras scandal.

We’re not yet done with Brazil, with Rousseff, or with Petrobras. More on Monday.

Posted on January 22, 2016December 29, 2015 by usefulstooges 6

Rousseff: round two

We’ve been looking this week at Brazil, where, under Luiz Inácio Lula da Silva, who served as its president from 2003 to 2010, the country’s economy boomed. Then his chief of staff, an apparatchik named Dilma Rousseff, was elected to succeed him – and everything started going down the drain.

Not that Rousseff is fully to blame for this decline. It’s clear that its seeds were sown under Lula, when the president and his ideological allies managed to convince themselves that Brazil owed its new prosperity to their welfare programs, rather than to a massive increase in trade with China. But it was Rousseff who was in charge once growth started to falter. Not understanding how economies worked, she responded to her nation’s calamity by doubling down on taxes, bureaucracy, and tariffs – a disastrous formula that guaranteed increasing stagnation. Nor did it help that the massive government and Workers’ Party corruption set in system under Lula only got worse, if anything, on her watch.

133549636_14078103493981n — At a campaign event

Despite the bad choices of her first term, Rousseff was re-elected (by a very close margin) in October 2014. Comments by her supporters left the impression that she’d won despite her handling of the economy, not because of it. (One voter, Natascha Otoya, while admitting that Rousseff’s government had been involved in “corruption,” “embezzlement,” and “white collar crimes,” said that “as a woman, a feminist and a socialist, I am very glad that Dilma has won! 4 more years for the left, I can only be happy about that.”) According to one source, Rousseff was re-elected only because a law requiring Brazilians to vote had guaranteed a big pro-Dilma turnout in poor regions, where people “feared losing their social programs.”

Unsurprisingly, her victory was celebrated in places like the New Yorker, where John Cassidy called it a win “for the world’s financial markets.” Brazil, insisted Cassidy, was “no basket case.”

Not yet, perhaps. But after Election Day, things got a lot worse – and did so very fast. “There is a process of economic, social and moral collapse under way,” said Senator Ronaldo Caiado, an opposition politician, on March 15, a mere two and a half months into Rousseff’s second term.

Then came the Petrobras scandal. Petrobras is Brazil’s national energy company. From 2003 to 2010, Rousseff, in addition to her other positions under Lula, had served as chair of Petrobras. Operation Car Wash, a probe into the firm’s operations from 2004 to 2014, began in 2014. It soon uncovered evidence that about $2 billion in company funds had been stolen during that decade by Petrobras officials, construction companies, and politicians – Rousseff included.

More on that probe – and the results thereof – tomorrow.

Posted on January 21, 2016January 18, 2016 by usefulstooges 2

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